Investing for retirement

Karen’s story

Karen’s situation:

Karen is thinking about her retirement and while she is still planning on working for a number of years she wants to continue to save. She’s already contributing into a pension and her savings are intended to complement her pension savings and help her have a chance of a comfortable retirement. Because interest rates are low at the moment she is looking for alternatives to the traditional savings accounts she is used to.

Karen’s objective:

In addition to her pension contributions, Karen has been saving money for her retirement in a Cash ISA and is now looking for the potential of better returns. Karen is looking to build a pot of money for her retirement.

Karen’s knowledge:

Karen hasn’t considered investing before, however she has been speaking to some friends and colleagues at work and she now knows that if she invested her money she has the potential for greater returns than a traditional cash ISA, however the actual returns would be affected by how her investment performs. She recognises that the value of her investment could go down as well as up. However she is prepared to take some risk.

Karen is aware that as she’s been saving in a Cash ISA she doesn’t pay any income tax on the interest she’s earning, though this favourable tax treatment could change in the future. She also knows that each tax year there are limits to how much she can pay in.

Karen’s approach:

Karen is now considering transferring part of her existing Cash ISA into a Stocks and Shares ISA and then plans to make regular payments into it each month.

If she needs to she knows she can change or stop her monthly payments at any point.

Karen is an illustrative character designed to highlight why and how people approach investing. Her financial situation, objective, knowledge and approach are fictional and you should always consider your own before investing.

Important Information

Please remember the value of your investments and any income from them can go down as well as up and you may get back less than the full amount you invest. When you invest you should be prepared to have your money invested for the medium to long term, typically at least 5 years.

With traditional savings your capital will grow when interest is added, however over time the real value will be affected by inflation. With investments, your capital isn’t guaranteed to grow, however they have more potential to balance the effects of inflation.

The tax treatment of your savings and investments, including the favourable tax treatment of ISAs, may be subject to change in the future and depends on your individual circumstances. She also knows that each tax year there are limits to how much she can pay in. You can only pay into one cash ISA, one stocks and shares ISA, one innovative finance ISA and one lifetime ISA each tax year, up to the annual ISA limit.

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